South Korea’s inflation rate slowed to 2% in August, the lowest level since March 2021. The consumer price index rose 2% year-on-year, matching expectations from a Reuters poll of economists. On a month-on-month basis, the CPI increased 0.4%, slightly higher than the 0.3% forecast.
The decline in inflation comes as most Asia-Pacific markets fell on Tuesday. South Korea’s KOSPI dropped 0.61% to 2,664.63, while the Kosdaq fell 1.15% to 760.37. Japan’s Nikkei 225 closed marginally lower at 38,686.3, but the Topix rose 0.64% to 2,733.27.
Australia’s S&P/ASX 200 also dipped 0.08% to 8,103.2.
Mainland China’s CSI 300 recovered from a seven-month low on Monday, rising 0.26% to 3,273.49. Hong Kong’s Hang Seng Index slipped 0.18% in its final hour of trade. U.S. markets were closed on Monday for Labor Day.
south korea inflation dips to 2%
Futures tied to the three major U.S. indexes were down ahead of Tuesday’s session, with the Dow Jones Industrial Average falling 57 points, or 0.14%, the S&P 500 dropping 0.12%, and the Nasdaq Composite declining 0.26%. The Bank of Korea has held its key rate at 3.5% since early 2023, characterizing it as restrictive.
With inflation slowing to the BOK’s 2% target, four of seven board members are now open to cutting rates by year-end. Governor Rhee Chang-yong hasn’t disclosed his view, but many economists expect a rate cut on Oct. 11 if home price growth slows, easing household debt concerns.
The BOK said inflation is expected to remain stable at the current pace barring unexpected supply shocks. Policymakers are increasingly focused on home prices in Seoul, which have risen rapidly, spurring concerns about household debt and financial imbalances. In August, apartment purchases in Seoul fell for the first time in months, while sales prices continued to slide.
Weak private spending and credit risks in construction add to the case for a rate cut this year. Growing odds of a Federal Reserve pivot this month also support the view that the BOK could follow suit.
- CNBC.”Asia-Pacific markets mostly fall after South Korea’s inflation rate hits 42-month low”.
- Yahoo.”Korean Inflation Slowing to Target Nudges BOK Closer to Pivot”.
- Bloomberg.”BOK’s Rhee Says Time to Mull Rate Cut After Inflation Eases”.